Rather than funneling profits from housing-finance giants Fannie Mae and Freddie Mac to the government, those funds could be put to better use by providing capital that supports a transition to a new mortgage-finance system, a housing expert said Monday at a summit in Washington.

“The problem now is there seems to be a lack of capital in the transition,” said Nagendra Jayanty, an analyst with Claren Road Asset Management. “We should really be using the funds to capitalize a new system.”

Under a bailout agreement with the government, Fannie and Freddie send their quarterly profits to the U.S. Treasury Department. Critics have said this cash-cow arrangement has cut the urgency among U.S. lawmakers to move forward with comprehensive housing-finance reform that includes winding down government sponsored enterprises Fannie and Freddie.

U.S. lawmakers have proposed a housing-finance model that would dramatically reduce the government’s role but would still include an emergency federal backstop when loans go bad. Providing capital from Fannie and Freddie to fund the new system that Congress has envisioned would ease private-market concerns about investing in housing, Jayanty said at “Housing America’s Future: New Directions for National Policy,” a summit run by the Bipartisan Policy Center.

“If you are someone who works in the housing-finance food chain, your biggest fear is that the new system won’t work,” Jayanty said. “If we use GSE profits to help capitalize the new system…it opens a lot of policy options.”

However, Bruce Morrison, former chairman of the Federal Housing Finance Board, said a new pool of capital should not be set aside for politicians. “We should be reducing the profits of the GSEs,” he said.